• It was down 1% (red column) versus H1 2011 (green) , and down 3% versus H1 2010 (blue)
• China’s own production has plateaued temporarily, up 4% versus 2010
• Imports were down 9%, and exports up 82%, versus 2010

One major learning is that PE demand seems unconnected with GDP. Many commentators have argued that China’s PE demand will grow at 1.5x or even 2x GDP. But there is no evidence for this optimism over the past 2 years.

Equally, there is little evidence to support US optimism over its ability to export increased PE volumes due to its feedstock cost advantage from shale gas. In fact, the reverse is true, with China’s imports from NAFTA down 59% versus 2010.

The data does, however, provide support for the idea that China’s economy is much weaker than the published GDP figures suggest. Last month, the blog highlighted the problems developing in the city of Wenzhou, often a leading indicator for the rest of China.

It is in the affluent coastal province of Zhejiang. And now the provincial government has released a report which was summarised in the official China Daily newspaper as follows:

“Weak demand, rising labor costs and strained liquidity are ravaging enterprises in East China’s Zhejiang province, a traditional stronghold of China’s entrepreneurship, and forcing them to scale down or even halt production. The report, based on a month-long investigation and interviews with local government officials and businessmen, said that falling earnings, rising production costs and dwindling orders are now plaguing most of Zhejiang companies

“In Wenzhou alone, 60.43% of the industrial enterprises have scaled down or halted production. In the first five months of the year, the net profit of large companies dropped 23.8%, for medium companies decreased 18.3% and for small and micro enterprises declined 14.3%.

“The report warned that the bleak situation for Zhejiang’s enterprises could snap their capital chains and threatens to cripple the credit system.”

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry.

The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such as oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts.

Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.